R*Shares Bank BeES (An Open Ended Index Exchange Traded Scheme) (Rajiv Gandhi Equity Saving Scheme (RGESS) Qualified Scheme) Contents Why Equity ETF? Page 2 Strategies used through Index based Equity ETFs Page 2 Transaction Options available for investors Page 3 Creation Unit Size Page 3 R*Shares Bank BeES Page 4 Positioning R*Shares Bank BeES Page 4 Investment Objective: R*Shares Bank BeES Page 4 Benefits of R*Shares Bank BeES Page 4 Why Invest in Nifty Bank? Page 4 Current Valuations Page 6 Constituents of R*Shares Bank BeES Page 6 Scheme Features R*Shares Bank BeES Page 6 Disclaimers Page 7 1
Reliance Nippon Life Asset Management Limited (RNLAM) (formerly Reliance Capital Asset Management Limited) is one of the largest asset managers with more than 21 years of experience in managing wealth of investors with a robust distribution network in India and a global reach through its various subsidiaries. To cater to the increasing demand for passive management, we offer a variety of Exchange Traded Funds (ETFs) under a distinct identity R*Shares. Currently, we offer thirteen equity ETF s benchmarked against Nifty Bank Index, Nifty 100 Index, Nifty 50 Index, Nifty India Consumption Index, Nifty Dividend Opportunities 50 index, Nifty 50 Value 20 Index, Nifty Next 50 Index, Nifty Infrastructure Index, Nifty50 Shariah Index, Nifty PSU bank Index, Nifty CPSE Index, Heng Seng Index & S&P BSE Sensex Index, two debt ETF, Gilt ETF benchmarked against Nifty 8-13 yr G- Sec Index & Liquid ETF in money market space and one commodity ETF based on domestic prices of Gold. Why Equity ETF? Ease of transaction - Can be easily bought / sold like any other stock on the exchange through terminals spread across the country Ease of Liquidity - Can be bought / sold anytime during market hours (subject to availability of buyer/seller) at prices prevailing in the market. Thus, investor transacts at real-time prices. Low Cost - Generally less expensive than investing in multiple individual securities or a mutual fund Other Special Features o o o Instant diversification through exposure to a large number of stocks by purchasing as low as 1 unit Buying / selling at close to live price and not end-of-day, also ability to put limit orders Authorised Participants / Large investors can buy in creation unit size directly from the AMC at Live Prices un creation unit sizes Strategies used through Index based Equity ETFs Liquidity Management - ETFs can be used for a given percentage of each asset class to provide a liquidity buffer across the asset allocation Portfolio Completion - ETFs allow investors to gain exposure to an asset class that is under-represented in the asset allocation Cash Equitization ETFs assist in remaining fully invested into equity as per the allocation model, while maintaining liquidity, thus minimizing the cash drag effect on the portfolio Portfolio Transitions Since ETFs are passive funds, they may help maintain market exposure while there are changes in sector/stock allocations in a portfolio, hence avoids the risk of missing any market movement 2
Transaction Options available for investors Subscription Process Features Through Stock Exchange online terminal / stock broker Can trade as less as 1 Unit Funding to be done on T+1 Unit credit on T+2 Transaction on Exchange traded price No paperwork Transaction on order matching and availability of quotes Through AMC (Authorized Participants & Large Investors) Transaction form with requisite documents Can transact in multiples of creation unit size Can happen in Cash or basket of stocks Transaction in exchange of Portfolio deposit & Cash Component Redemption Process Features Through Stock Exchange online terminal / stock broker Can trade as less as 1 Unit Units taken on T+1 Amount credited T+2 Through AMC (Authorized Participants & Large Investors) Redemption Request Can trade in multiples of creation unit size Can happen in Cash or basket of stocks Transaction in exchange of Portfolio deposit & Cash Component Live Prices (NAV) with the basket is available on Bloomberg page RITE for reference Creation Unit Size Creation Unit size is the minimum denomination of unit that can be directly purchased/redeemed from AMC Tradable Unit Composition Creation Unit Size 1 Unit R*Shares Bank BeES ~ 1/10 of Nifty Bank Index 1000 units of R*Shares Bank BeES NAV Value 30-Nov-16 Approx. Basket Value (Rs.) 1884.6352 18,84,635 * NAV as of 30-Nov-16 taken as reference value Importance of Creation Unit Size In case of non-availability of sizeable quote, Investors can transact with the AMC in creation unit lots Investors can transact both in form of cash or stock basket comprising the index Units are created at live NAV price plus expenses 3
R*Shares Bank BeES Positioning R*Shares Bank BeES R*Shares Bank BeES is an Exchange Traded Fund (ETF) listed on NSE, and invests in stocks of Nifty Bank Index in the same proportion as the underlying Index R*Shares Bank BeES is less expensive than investing in individual securities of the Nifty Bank Index. It provides an opportunity to investors for passively investing in a well-expanded portfolio of top banks as per free float market capitalization, as approximately represented by Nifty Bank Index Investment Objective: R*Shares Bank BeES The investment objective of R*Shares Bank BeES is to provide returns that, before expenses, closely correspond to the total returns of the Securities as represented by the Nifty Bank Index. There can be no assurance or guarantee that the investment objective of the Scheme will be achieved. Benefits of R*Shares Bank BeES Well Defined Portfolio: R*Shares Bank BeES investment strategy & stock selection is clearly defined; it would replicate the Nifty Bank Index & invest only in companies forming the index in the same proportion as the underlying Diversification: Buying a single unit currently offers diversification of 12 stocks in the banking sector Transparency: Nifty Bank Index constituents are made available in public domain on a daily basis by NSE Liquidity: ETF units are traded on exchanges & can be easily liquidated during trading hours (subject to availabiiity of buyer/seller). Authorised Participants / Large Investors also have the option of coming to the AMC for procurement/sale of units in creation unit sizes (1000 units with 1 unit equivalent to 1/10 of Nifty Bank Index) Hedging option available: The Index has a derivative listed on NSE called BANKNIFTY which can be utilized to hedge the investment during extreme volatility Sector Exposure with less Idiosyncratic risk: R*Shares Bank BeES allows one to take exposure to the banking sector with relatively less stock specific risk, as risk gets diversified among basket of stocks Index track Record: Launched in Sep-2003, base date 1-Jan-2000 the index has a track record of 13 years Why Invest in Nifty Bank? Over the last couple of years, we have witnessed a steady improvement across key macroeconomic parameters like the Twin Deficits, Inflation, Currency, GDP growth etc. This along with policy reforms like GST, FDI in key areas and nonlinear positives like lower commodity prices is likely to fuel a strong economic revival over the next few years. Banking sector is backbone for any economy and is the key beneficiary as well as catalyst of economic recovery. We believe, the sector is set to benefit significantly from the domestic recovery over the medium to long term. The sector revival is usually characterized by the key phases of lowering of interest rates, asset quality improvement followed by higher credit off-take. The sector offers a good play on consumption & capex revival and can be a significant beneficiary of the domestic revival. 4
Nifty Bank Index forms the representation of Indian Banking Sector currently having 12 stocks comprising both private and PSU banks qualifying as per the index selection criterion. It is amongst the most traded sector index in India. With a lot of thrust being initiated from the new government on development, this sector becomes attractive for investors. Few factors which would support the growth in Indian Banking sector in the coming few years: Fiscal Control Deficit: The control of Fiscal Deficit augurs well for the sector. The government has reiterated its commitment to meet the fiscal austerity targets without too much reduction of gross spending. Reduced Subsidy burden: A sharp fall in crude oil prices has helped in savings of approx. 50bn US$ for the country. This translates into subsidy savings of over 18bn US$ for the government further improving the fiscal condition Lower Inflation: Inflation continues to remain within the comfort range of RBI and commodity prices are expected to remain subdued for a period of time Important Banking Reforms: o Insolvency and Bankruptcy Code This will provide with single unified law, subsumes multiple provisions and bestows voting rights on all types of lenders (domestic, overseas, secured and unsecured) thus enabling faster recovery process o Sustainable Structuring of Stressed Assets is largely a superset of the strategic debt restructuring scheme (SDR). The new scheme allows (i) the possibility of the promoter continuing with a majority shareholding, (ii) specifies an identifiable level of sustainable debt (iii) brings in the option of convertible preference shares/debentures with promoters having the right of first refusal and (iv) brings in the likelihood of higher upgrades. Policy actions to aid Asset Quality Improvement: Key initiatives like coal ordinance, mining approvals, revival of manufacturing through Make in India campaign, fast tracking of large projects, schemes like 5-25 schemes to provide for long repayment cycle to Power Plans and enabling long term lending by bank etc are expected to boost the economic activity. This in turn is expected to help in reduction of the Non performing assets. Economic revival can also assist in deleveraging of assets by stressed business groups leading to improved asset quality and addressing some of the NPA burden in the sector. *Sources: Bloomberg, BofAML Global Research estimates, World Bank, CSO, RBI, Ministry of Finance, NSSO, MOSPI, Government of India, Ministry of Industry, IMF, RMF Internal Research 5
Current Valuations The P/E, P/B and dividend yield of Nifty Bank Index are as follows: Index Level P/E P/B Dividend Yield 15-Sep-03 (Launch Date) 1875.79 11.62 2.07 1.83 14-Jan-08 (High Valuation) 10698.35 27.44 4.73 0.67 09-Mar-09 (Low Valuation) 3339.70 6.22 0.97 2.74 30-Nov-16 (At Present) 19787.6 29.21 2.5 0.77 Note: Though Nifty Bank Index was launched on 15-Sep-03, the base date of the Index is 01-Jan-00. The historical index values of the index is available on www.nseindia.com. The above dates are taken only for illustration purpose which suggests that even though absolute levels of Nifty Bank Index increased, valuations are almost at the same levels or cheaper. Past performance may or may not be sustained in future. Investors are advised to consult their financial advisor before making any investment. Source: RMF Internal Research; and MFI Constituents of R*Shares Bank BeES as on 30 th November 2016 Sl No. Stock Weightage 1 HDFC Bank Limited 30.67% 2 ICICI Bank Limited 19.62% 3 Kotak Mahindra Bank Limited 11.46% 4 State Bank of India 10.18% 5 Axis Bank Limited 10.13% 6 IndusInd Bank Limited 6.92% 7 Yes Bank Limited 4.91% 8 Bank of Baroda 1.97% 9 The Federal Bank Limited 1.55% 10 Punjab National Bank 1.31% 11 Canara Bank 0.75% 12 Bank of India 0.35% Cash & Other Receivables 0.18% Total 100.00% Note: The stocks mentioned forms a part of the portfolio of the scheme and may or may not form a part of the portfolio in future. Please read Scheme Information Document carefully for more details and risk factors. Source: RMF website Scheme Features R*Shares Bank BeES Nature of Scheme Benchmark Open Ended Exchange listed index linked scheme Nifty Bank Index Fund Manager Payal Wadhwa Kaipunjal (Managing Scheme since May 2004)^ Inception Date 27 th May 2004 Rule of 20-25 Rule of a minimum of 20 investors and no single investor accounting for more than 25% of the corpus of the Scheme does not apply to ETFs 6
Asset Allocation Transparency/NAV Disclosure Value of Unit Load Structure Minimum Application Amount Dematerialization Securities covered by Nifty Bank Index : 95%-100% Money Market Instruments (with maturity not exceeding 91 days), including CBLO, cash & cash equivalents: 0%-5% The NAV will be calculated and disclosed by the Fund at the close of every Business Day which shall be published in at least two daily newspapers and also uploaded on the AMFI site www.amfiindia.com and Reliance Mutual Fund site i.e. www.reliancemutual.com. The value of each unit of the Scheme would be approximately equal to 1/10th of the value of Nifty Bank Index Entry & Exit Load : Nil The minimum number of Units that can be bought or sold on the exchange is 1 (one) unit and in multiples of 1 unit. Directly from AMC: Allowed to Authorized Participants & Large Investors in form of creation unit size of 1000 units Units of the scheme will only be available in Dematerialized (electronic) form only ^ On Nov 05, 2016 all the schemes on Goldman Sachs Mutual Fund have been taken over by RNLAM and post merger R*Shares Banking ETF got merged with GS Bank BeES, the scheme is currently represented as R*Shares Bank BeES Scheme specific risk factors: The scheme invests in equity instrument and hence carries risk inherent in equities. Trading volumes, settlement periods and transfer procedures may restrict the liquidity of the investments. Investment in Money Market is subject to liquidity, credit, interest rate & reinvestment risk. For further Scheme specific risk factors, please refer the scheme information document. Disclaimers NSE Disclaimer: It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed that the Scheme Information Document has been cleared or approved by NSE nor does it certify the correctness or completeness of any of the contents of the Draft Scheme Information Document. The investors are advised to refer to the Scheme Information Document for the full text of the Disclaimer Clause of NSE The views expressed herein constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. This information is meant for general reading purposes only and is not meant to serve as a professional guide for the readers. Certain factual and statistical (both historical and projected) industry and market data and other information was obtained by RNLAM from independent, third-party sources that it deems to be reliable, some of which have been cited above. However, RNLAM has not independently verified any of such data or other information, or the reasonableness of the assumptions upon which such data and other information was based, and there can be no assurance as to the accuracy of such data and other information. Further, many of the statements and assertions contained in these materials reflect the belief of RNLAM, which belief may be based in whole or in part on such data and other information. The Sponsor, the Investment Manager, the Trustee or any of their respective directors, employees, affiliates or representatives do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and 7
reliability of such information. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and opinions given are fair and reasonable. This information is not intended to be an offer or solicitation for the purchase or sale of any financial product or instrument. Recipients of this information should rely on information/data arising out of their own investigations. Readers are advised to seek independent professional advice, verify the contents and arrive at an informed investment decision before making any investments. None of the Sponsor, the Investment Manager, the Trustee, their respective directors, employees, affiliates or representatives shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this material.the Sponsor, the Investment Manager, the Trustee, any of their respective directors, employees including the fund managers, affiliates, representatives including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities thereof, of company(ies) / specific economic sectors mentioned herein. Mutual Fund investments are subject to market risks, read all scheme related documents carefully. 8